We comment on the equity method ED

  • Deloitte Comment Letter Image

10 Feb 2014

We have published our comment letter on the IASB’s Exposure Draft ED/2013/10 'Equity Method in Separate Financial Statements'. We agree with the proposal as a short-term measure but believe that certain modifications need to be made before finalising the amendments to address the issue raised by entities in certain jurisdictions that require the use of the equity method to account for its investments in subsidiaries, joint ventures and associates in preparing its separate financial statements. However, we do not agree with the consequential amendment to IAS 28.

The comment letter notes that equity accounting remains an area of controversy due to the lack of guidance in IAS 27 Separate Financial Statements on the purpose of separate financial statements or the principles underpinning the measurement of an entity’s investment in its separate financial statements. We suggest that the IASB develop an underlying basis for the preparation of separate financial statements and should evaluate whether in its separate financial statements an entity should be permitted to account for different types of investments on an inconsistent basis.

We do not agree with the suggested amendment to IAS 28 because we do not believe that the principles applied to loss of control over a subsidiary in IFRS 10 Consolidated Financial Statements should be applied in a situation where loss of control does not result in a change in the method of accounting applied because both subsidiaries and associates or joint ventures are accounted for using the equity method.

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